My trade for today was selling two more puts on CPRI. CPRI has outsized premium right now because of the FTC trial to block the merger with Tapestry. Tapestry plans to acquire CPRI $57 per share. I currently have 100 shares of CPRI with a cost basis of $31.10 per share.
I sold two put options with the $37.50 strike price expiring this Friday, 9/20 for $0.90 in premium. That makes my effective purchase price on those shares $36.60 if I’m assigned shares. This is a one week long trade, so in theory I could to this trade 52 times in a year (or a similar trade on a different company). When I divide the $0.90 in premium into the $37.50 strike price I get 0.024. Then I multiply that by 52 (weeks in a year) and I get 1.248, for an annualized return of 124%. If I get assigned shares I’ll sell a covered call to reduce my cost basis further, and that will leave me with 200 shares if it’s called away. If I don’t get assigned shares I’ll make my 124% annualized return this week and look a another trade next week. Here’s more detail on the trade.
Posted by mtrosejibber